Knowledge Base
Assess the valuation processes of collective investment schemes (CIS)
Which method is used for the valuation of unlisted equities?
For unlisted equities, valuation relies on fair value methods such as discounted future cash flows or transaction multiples. These methods are essential for estimating the value of assets not traded on a market, as specified in the asset-class valuation process.
Which article of the AMF General Regulation requires the depositary to verify the compliance of valuation procedures?
Article 323-19 of the AMF General Regulation imposes several obligations on the depositary, including verifying the compliance of net asset value calculation procedures. This oversight is essential to ensure that the procedures followed meet regulatory requirements.
What is the primary source of prices for listed instruments in the CIU valuation process?
According to the valuation workflow, regulated markets provide closing prices for listed instruments. This information is critical as it forms the basis of valuations for these assets, as specified in the hierarchical price collection process.
What is the mandatory procedure in case of significant discrepancies in the valuation of complex financial instruments?
For complex financial instruments, a mandatory counter-valuation is required when the price comes from a single source. This requirement is stipulated by AMF Position-Recommendation 2012-19 to ensure the accuracy and independence of valuations.
Categorize items by dragging them to the appropriate zones
Items to categorize:
First-level controls
Second-level controls
First-level controls are daily and include verification of prices and discrepancies. Second-level controls are periodic and cover the annual review of policies and the analysis of threshold breaches. This distinction is crucial for understanding the overall valuation process control framework.
The valuation policy must include a periodic review procedure.
Articles 67-70 of the AIFM Delegated Regulation require that the written valuation policy include a periodic review procedure. This requirement aims to ensure that the methods and sources used remain relevant and comply with market developments.
The valuation policy must be approved by senior management only for AIFs.
According to AMF Position-Recommendation 2012-19, a documented and validated model is required for complex financial instruments, and approval by senior management is necessary for AIFs. However, the valuation policy itself must be written and defined for all CIUs, in accordance with Articles 67-70 of the AIFM Delegated Regulation.
First-level controls
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First-level controls, performed daily by the management company, include verifying the origin of prices used, ensuring compliance with the priority order of sources, checking for significant discrepancies from the previous NAV (with alert thresholds generally above 2%), and ensuring consistency between the valuator and accounting records. These controls are essential for ensuring the accuracy of daily valuations.